exceeding expectations

since 1985

Special Problems &

Situations in GST
Mr. L. Badrinarayanan
5 November 2017
Agenda
Permanent Transfer of Intellectual Property Rights
Issues in various sectors
 Agency Service Sector
 Insurance Sector
Impact on Trade Promotion Schemes
Cross Charge v/s ISD
 Permanent Transfer of
Intellectual Property Rights

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 Goods or Services?
Permanent Transfer of IPR
Article 366(29A) in The Constitution Of India
(29A) tax on the sale or purchase of goods includes
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period)
for cash, deferred payment or other valuable consideration;

V/s
Notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 Under Sl. No. 17, Heading 9973-

Chapter, Section or Description of Service Rate (per cent.)

Heading
9973 (Leasing or (iii) Transfer of the right to use any goods Same rate of central tax as on
rental services, with for any purpose (whether or not for a supply of like goods involving
or without operator) specified period) for cash, deferred transfer of title in goods -
payment or other valuable consideration.

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 Issues in Agency Service Sector

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G.T.A.- Location of Supplier of Service
Mumbai
Truck Company
(Registered H.O.)
Sale

Transferred

Jaipur
Service Receiver
(Unregistered Branch)

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 G.T.A.- Location of Supplier of Service
(71) “location of the supplier of services” means,—
(a)where a supply is made from a place of business for which the registration has been obtained, the
location of such place of business;
(b)where a supply is made from a place other than the place of business for which registration has been
obtained (a fixed establishment elsewhere), the location of such fixed establishment;
(c)where a supply is made from more than one establishment, whether the place of business or fixed
establishment, the location of the establishment most directly concerned with the provisions of the supply;
and
(d)in absence of such places, the location of the usual place of residence of the supplier;
 What is the location of Service Provider?
 Who will avail the ITC of Truck?
 Accumulation of ITC

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 Agent as a Service Provider

Airlines Agent Passenger

 Whether sale of air tickets by agent to Passenger be treated as Supply of services?

 Schedule I does not covers transactions between Principal & Agent in case of services
 Can Agent as per IATA be treated as Service Provider?

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 Issues in Insurance Sector

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 Garage Repair Services
Tax Invoice Supply of
parts
Insurance Company
Garage (Gujarat) Insured
(Maharashtra)
Agreement for
repairing in
Gujarat

 What will be place of supply for parts?

• Location of goods when movement of goods terminates for delivery to recipient [Section 10(1)
(a) – CGST + SGST]
• Principal place of business of recipient [Section 10(1)(b) – IGST]

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WHA Model
Insurance
Reinsurance (exempt service)

8 5% Group Service to
Reinsurance Companies

Service Invoice to

 Insurance Company, Customer, Garage and WHA Ltd located in UK

 Crystal and Viscount of Gibraltar and WHA Ltd of UK are group companies
 WHA Ltd claiming refund of input tax credit for export service to Viscount
 Economic reality - WHA Ltd only making payment to cover garage costs. ITC not available
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 Trade Promotion Schemes

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Types of Promotion Schemes

 Gifts
 Samples
 Buy One – Get One (Linked Goods/Multiple goods)
 Money Off Coupons/Vouchers
 Discounts
 Joint marketing Schemes

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GST Implications - Gifts
Section 17(5)(h) - Non availability of input tax credit
“goods lost, stolen, destroyed, written off or disposed by way of gift or free samples”
Under UK VAT law, free business gifts – Taxable + Available input tax credit

Above 50  VAT due on the price of identical products

pounds  Also applicable on series of gifts to a single person

Below 50
 No VAT due, input tax credit available
Pounds

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Samples / Gifts
“Specimen of a product which intends to promote the sales of that product and which allows the
characteristics and qualities of that product to be assessed without resulting in final consumption, other
than where final consumption is inherent in such promotional transactions”

• In UK – No VAT payable Promotion of

• In Australia – Free Samples are GST-free a new product
– Under GST Act,
– No distinction between free samples and gifts made in course or furtherance of business

Free Samples also to qualify as supply without consideration ?

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Mixed Supply / Linked Goods
 Promotion of Goods/Services for a single Price
 Considered to be a ‘multiple supply’ of goods/services under both UK VAT and Australia GST
laws.
 In case combination of goods/services with differential rates of VAT or taxable and non
taxable supplies – Rules of apportionment provided.

Apportionment Rules in UK Apportionment Rules in Australia

 VAT Notice 700: The VAT Guide  Section 9-75 – 10/11 of the consideration
 Linked Supplies Concession  Section 9-80 – value of actual supply =
price of actual supply*10/ 10+ Taxable
proportion

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 Vouchers – Goods or Service?

 “goods’’ means every kind of movable property other than actionable claim and money but includes
securities, growing crops, grass and things attached to or forming part of the land which are agreed to be
severed before supply or under the contract of supply;
Explanation.– For the purpose of this clause, the term ‘moveable property’ shall not include any
intangible property.
 “services’’ means anything other than goods;
Explanation: Services include intangible property and actionable claim but does not include money.

Vouchers – Goods or Services?

Supply of Sodexo Coupons –

Sodexo SVC India Private Limited v. State of Maharashtra & Ors.
Civil Appeal Nos. 4385-4386- SC

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Face Value Vouchers
 Vouchers ,tokens or stamps that represents a right to receive goods or services to the value of
an amount stated on it or recorded in it.
– Single Purpose Vouchers - Redeemable against specific goods/service of a specific VAT rate –
VAT payable on the issue
– Multi Purpose Vouchers – Redeemable against different goods/services - VAT payable if
consideration exceeds face value
 Credit Vouchers
 Retail Vouchers

Point of Taxation of Vouchers – Issuance or Redemption?

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Joint Marketing Schemes

 A single supply of services versus A simultaneous supply of services

 Barter Transaction – How to determine the valuation for the purposes of GST?

 Elida Gibbs (European Court of Justice)

 Loyalty Management UK (House of Lords & European Court of Justice)

 Baxi Group (House of Lords)

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Sales linked gifts
Supply of Main Product

Supply Supply

Supply of Free Product

Supply

 Customer receives 1 point on purchase of every product by Retailer.

 Customer can purchase 1 product for free from Manufacturer by using 5 such points.
 Is there any consideration involved in Second Transaction?
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Gifting used car to employee

Car
Company Employee
Company

 Company cannot avail ITC of GST paid on purchase of car? [Section 17(5)]
 Company has to charge GST from employee on transfer of car? [ Schedule I]

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 Cross charge v/s ISD

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 Cross Charge v/s ISD
• Which is the ideal method?
• Which services shall be received in HO / ISD GSTIN?
• Any loss of credit – implications?

Support Services Common Services

 Cross charging only  Input service Distributor

 Can cross charge method be
adopted?
 What will be the basis to cross
charge?

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Thank You